Bingley v. Bingley

ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Stephen P. Rothberg Lindsey A. Grossnickle
Fort Wayne, Indiana Columbia City, Indiana

In the FILED
Sep 29 2010, 12:14 pm
Indiana Supreme Court
_________________________________ CLERK
of the supreme court,
court of appeals and
tax court

No. 02S03-1002-CV-122

ANNE M. BINGLEY,
Appellant (Defendant below),

v.

CHARLES B. BINGLEY,
Appellee (Plaintiff below).

_________________________________

Appeal from the Court, No. 02D07-0605-DR-274
The Honorable Charles F. Pratt, Judge
_________________________________

On Petition to Transfer from the Indiana Court of Appeals, No. 02A03-0904-CV-187
_________________________________

September 29, 2010

Shepard, Chief Justice.

Charles Bingley filed to dissolve his marriage with appellant Anne Bingley. Charles had
retired from his employment with Navistar Corp., which paid premiums to a health insurance
company on Charles‟s behalf as part of his pension plan. Anne argued that the premiums
constituted property subject to division. The trial court held that the benefits Charles was
receiving did not constitute a marital asset.
 Because we conclude that employer-provided health insurance benefits do constitute an
asset once they have vested in a party to the marriage, we reverse.

Facts and Procedural History

On May 9, 2006, Charles Bingley filed to dissolve his marriage with Anne Bingley, his
wife of thirty-seven years. At the time of filing, Charles was seventy-five years old and had
retired from Navistar Corp. During Charles‟s retirement, Navistar paid him a monthly stipend as
part of his participation in a defined-benefit pension plan.

Under the pension plan, Navistar also paid a health insurance company $845.74 per
month in premiums on Charles‟s behalf and had promised to do so for the remainder of Charles‟s
life. (App. at 19.) Charles did not elect this arrangement in lieu of a larger monthly stipend, nor
did he have the choice to do so. (App. at 17, 19.) His right to health insurance benefits was not
subject to divestiture, division, or transfer. (App. at 17, 19.)

After the final hearing, the trial court left the record open so the parties could submit
additional information about Charles‟s health insurance benefits. Anne filed a supplement to the
record in which she argued using actuarial principles that the premiums had a present value of
$101,556. (App. at 25, 39, 44.) The trial court considered this value a contention instead of
evidence because Charles limited his response to arguing that the premiums did not constitute
property (he did not address the question of valuation).1 (App. at 25.)

1
The trial court based its decision to consider Anne‟s valuation a contention instead of evidence on the
fact that Charles did not have the opportunity to respond to Anne‟s valuation. (App. at 25.) It is not clear
from the record why Charles did not have this opportunity because he filed a Response to Anne‟s Motion
to Supplement the Record. (App. at 35.)

2
 When the trial court issued its decree of dissolution, it held that the premiums did not
constitute property within the meaning of Indiana Code § 31-9-2-98(b) (2008). The court
reasoned that because Charles‟s premiums had no cash surrender value, they more closely
resembled employer-provided group term life insurance than pension payments. (App. at 25);
see also Metropolitan Life Ins. Co. v. Tallent, 445 N.E.2d 990, 991 (Ind. 1983).

Anne appealed, and the Court of Appeals affirmed. Bingley v. Bingley, 915 N.E.2d 1006
(Ind. Ct. App. 2009). We granted transfer, thereby vacating the decision of the Court of Appeals.
Bingley v. Bingley, 929 N.E.2d 785 (Ind. 2010) (table); Ind. Appellate Rule 58(A).

Standard of Review

We review a trial court‟s valuation of an asset in a marriage dissolution for an abuse of
discretion. Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind. 1996) (citing Cleary v. Cleary, 582
N.E.2d 851 (Ind. Ct. App. 1991)). With respect to findings of fact about an asset‟s value, a trial
court has not abused its discretion if sufficient evidence and reasonable inferences support that
valuation. Id. (citing Porter v. Porter, 526 N.E.2d 219 (Ind. Ct. App. 1988)). Questions of law,
however, are subject to de novo review. Fobar v. Vonderahe, 771 N.E.2d 57 (Ind. 2002).

I. The Health Insurance Benefits Are Property.

When a trial court dissolves a marriage, it must divide the property of the parties between
them. Ind. Code § 31-15-7-4(a). For the purposes of such a dissolution, “property” means

all assets of either party or both parties, including:

(1) a present right to withdraw pension or retirement benefits;

(2) the right to receive pension or retirement benefits that are not
forfeited upon termination of employment or that are vested (as

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 defined in Section 411 of the Internal Revenue Code) but that are
payable after the dissolution of marriage; and

(3) the right to receive disposable retired or retainer pay (as
defined in 10 U.S.C. § 1408(a)) acquired during the marriage that
is or may be payable after the dissolution of marriage.

Ind. Code § 31-9-2-98(b) (emphasis added). The trial court may divide the property by awarding
parts of the property to one of the parties and requiring either party to pay an amount to the other
to achieve a just and proper distribution. Ind. Code § 31-15-7-4(b)(2).

Anne argues that health insurance premiums being paid for Charles constitute retirement
benefits that Charles earned during marriage, so the trial court should have included them in the
marital property subject to division. (Appellant‟s Br. at 2.) She further argues that Navistar‟s
paying premiums on Charles‟s behalf is analogous to a retirees receiving pension benefits.
(Appellant‟s Br. at 3–4.) Finally, Anne argues that because Charles‟s right to his health
insurance benefits had vested, the premium payments are analogous to vested pension benefits.
(Appellant‟s Br. at 4.)

Charles responds that his health insurance premiums do not constitute marital assets
because he cannot transfer or alienate his health insurance benefits, nor did he choose to receive
them in lieu of a larger monthly stipend under his pension plan. (Appellee‟s Br. at 4.) Charles
also argues that the value of the premiums is speculative because of the possibility that Navistar
may someday file for bankruptcy or cancel his health insurance benefits. (Appellee‟s Br. at 4.)

Framing the question as whether the premiums constitute property misconceives the
question. Rather than analyze whether Charles‟s health insurance premiums constitute
retirement benefits within the meaning of subsection (2), we think it plain enough that Charles‟s
health insurance benefits constitute an intangible asset.

The phrase “all assets” is broadly inclusive and is not limited to the list of examples that
follows it. See Beckley v. Beckley, 822 N.E.2d 158, 163 (Ind. 2005) (holding lump sum

4
payment for lost wages and pain and suffering was an asset to the extent it compensated for pain
and suffering). It has been customary to view the statute‟s list of examples simply as instances
falling within the ambit of “all property” rather than as suggestions that “all” is somehow less
than all-inclusive.2 See, e.g., Helm v. Helm, 873 N.E.2d 83 (Ind. Ct. App. 2007) (lottery
payments); Henry v. Henry, 758 N.E.2d 991 (Ind. Ct. App. 1995) (stock options); Sedwick v.
Sedwick, 446 N.E.2d 8 (Ind. Ct. App. 1983) (structured settlement annuity).

Whether a right to a present or future benefit constitutes an asset that should be included
in marital property depends mainly on whether it has vested by the time of dissolution. Compare
Hill v. Hill, 863 N.E.2d 456, 460–61 (Ind. Ct. App. 2007) (holding pension plan was an asset
when party was receiving payments at time of dissolution); with Bizik v. Bizik, 753 N.E.2d 762,
767–68 (Ind. Ct. App. 2001) (holding retirement plan was not an asset when it had not vested by
time of dissolution). In other words, vesting is both a necessary and sufficient condition for a
right to a benefit to constitute an asset. See Helm, 873 N.E.2d at 88 (“The common denominator
. . . is whether the interest in the future payment is „vested.‟”).

A right to a benefit can vest either in possession or in interest. In re Marriage of Preston,
704 N.E.2d 1093, 1097 (Ind. Ct. App. 1999) (“Vesting in possession connotes an immediate[ly]
existing right of present enjoyment, while vesting in interest implies a presently fixed right to
future enjoyment.”). Vested pension rights represent “„intangible assets of a spouse [that] have
been earned during the marriage, either through the contributions of the spouse [that] otherwise
would have been available as assets during the marriage, or through contributions of the
employer [that] constitute deferred compensation.‟” Preston, 704 N.E.2d at 1097 (quoting 2

2
Indeed, this is Anne‟s principal argument. The statute expressly includes retirement benefits in the
definition of property even if they are payable after the marriage dissolution. Ind. Code § 31-9-2-
98(b)(2). The only condition is that either the beneficiary does not forfeit them on termination of
employment or the benefits have vested as defined in Section 411 of the Internal Revenue Code. Id.

5
Homer H. Clark, Jr., The Law of Domestic Relations in the United States § 16.6, at 208 (2d ed.
1987)).

A similar theory explains why disability payments received after a marriage dissolution
are not assets for the purposes of a marriage dissolution. Leisure v. Leisure, 605 N.E.2d 755
(Ind. 1993) (holding workers‟ compensation payments were not assets to the extent they replaced
lost future wages after marriage dissolution); see also Beckley, 822 N.E.2d at 162 (holding
person did not have a vested interest in future wages). The exception to this rule occurs when a
party purchases or contributes to disability insurance with marital assets, namely, wages in which
the party had a present interest. Gnerlich v. Gnerlich, 538 N.E.2d 285, 286 (Ind. Ct. App. 1989).

Vesting also explains our holding that employer-provided group term life insurance is not
an asset. Tallent, 445 N.E.2d at 991 (Ind. 1983). In Tallent, a husband changed the beneficiary
on his life insurance policy from his wife to his mother after his wife filed to dissolve their
marriage and just before he committed suicide. Id. The husband was subject to an order
restraining him from disposing of his property, but we held that the life insurance policy was not
an asset of the husband‟s. Id. The beneficiary, not the insured, had “„a defeasible vested interest
in the policy, a mere expectancy, until after the death of the insured.‟” Id. at 992 (quoting
Bronson v. N.W. Mut. Life Ins. Co., 129 N.E. 636, 639 (1921) (emphasis in original)).

We think Charles‟s health insurance benefits constitute an asset in the plain meaning of
the word. Charles has a right to the medical services his health insurance will cover for the rest
of his life. Because Navistar has assumed a monthly liability that Charles would otherwise have
had to bear, Charles‟s health insurance benefits more closely resemble a right to future pension
payments, which the Court of Appeals described as an intangible asset in Preston. 704 N.E.2d at
1097. Unlike the term life insurance in Tallent, the policy holder of which was not the same
person as the beneficiary, the health insurance in this case benefits the same party to the marriage
dissolution who owns the policy. 445 N.E.2d at 991.

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 Most importantly, Charles‟s health insurance benefits have vested. The parties did not
dispute that Navistar was paying Charles‟s premiums at the time of dissolution. As a result,
Charles had a present right to enjoy his health insurance benefits. Moreover, the parties did not
even dispute that Charles‟s health insurance benefits were not subject to divestiture in future
years. Tallent is doubly not on point because the beneficiary in that case had an interest that was
defeasible. 445 N.E.2d at 992.

Charles‟s principal argument is that his health insurance benefits cannot constitute an
asset because he cannot transfer or alienate them. (Appellee‟s Br. at 4.) As a result, Charles
could not dispose of his health insurance benefits to generate cash to pay Anne in order to
achieve a just and proper distribution. This illiquidity is relevant to the value a trial court may
assign to an asset, but not to whether benefits constitute an asset in the first place. See Part II,
infra.

Charles further argues that his health insurance benefits cannot constitute an asset
because their value is speculative. As a result, Charles may have to pay Anne more to retain the
asset than his share ends up being worth. As with illiquidity, however, the fact that a person
bears the risk of future changes in value is relevant to the present value a trial court may assign
to an asset, but not to whether benefits constitute an asset in the first place. See Part II, infra.

II. What Are These Benefits Worth?

Because the trial court held that Charles‟s premiums did not constitute an asset, it
understandably did not reach the question of valuation. Valuation is the more difficult aspect of
this case.

We have not previously addressed the possible methods of valuing health insurance
benefits in a marriage dissolution. We begin by noting that a trial court has broad discretion to
value an asset based on the evidence. Quillen, 671 N.E.2d at 102 (citing Cleary, 582 N.E.2d at

7
852). Appellate courts review such valuations for an abuse of discretion. Id. So long as
sufficient evidence and reasonable inferences support the valuation, the trial court has not abused
its discretion. Id. (citing Porter, 526 N.E.2d at 222).

The method a trial court uses to value health insurance benefits may vary case by case
and may depend on the type of evidence the parties introduce. Three possible methods of
valuing health insurance benefits seem plausible, though still other methods may be more
appropriate in certain circumstances.3

For example, a trial court might value health insurance benefits by considering the cost of
obtaining comparable alternative benefits. Presumably, this would involve discounting to
present value the premiums a person would have to pay to obtain individual health insurance if
he did not have the benefit of employer-provided health insurance. This method may be more
likely to overstate the value of health insurance because of adverse selection and the tax-
disfavored status of the individual health insurance market. It might also entail a higher cost in
terms of expert witnesses.4

3
The potential application of multiple methods of valuation exists in other settings. For instance, we
have described somewhat similar methods of estimating the fair market value of property taken by
eminent domain using
(1) the current cost of reproducing the property less depreciation from all sources; (2) the
“market data” approach or value indicated by recent sales or comparable properties in the
market; and (3) the “income-approach,” or the value which the property‟s net earning
power will support based upon the capitalization of net income.
Bishop v. State, 800 N.E.2d 918, 923–24 (2003) (emphasis in original). We noted that any or all of these
three methods were appropriate ways of valuing real estate. Id. at 924.
4
We caution that we have not found a decision from a court that has used this method to value health
insurance benefits, and at least one court has expressly disapproved of it. See, e.g., Hansen v. Hansen,
119 P.3d 1005, 1016 (Alaska 2005).

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 Second, a court might value health insurance benefits by considering the premium
subsidy from the employer.5 Presumably, this would involve discounting to present value all the
premiums an employer had agreed to pay on behalf of a party while also taking into account the
party‟s remaining life expectancy and the probability of the policy lapsing before the termination
date. Anne effectively urged the trial court to adopt this discounted premium subsidy method
when she submitted her Motion to Supplement the Record with her contentions of the asset‟s
value. (App. at 39.)

Third, a trial court might value health insurance benefits by considering the cost of
providing medical services covered by health insurance.6 We anticipate that this would involve
discounting to present value the expected costs of the medical services a health insurance plan
would cover while also taking into account the party‟s remaining life expectancy and the
probability of the policy lapsing before the termination date. Although this method may be
necessary in certain circumstances, it also appears to be the most difficult to apply.

Regardless of how a trial court chooses to value health insurance benefits, the next
question will always be how to divide the assets between the parties. There is a rebuttable
presumption that an equal division of the marital property is just and reasonable. Ind. Code § 31-
15-7-5. A party may rebut that presumption by introducing evidence that relates to “[t]he
economic circumstances of each spouse at the time the disposition of the property is to become
effective.” Ind. Code § 31-15-7-5(3).

5
Although academics and practitioners have argued over whether health insurance benefits should be
included in marital property, they seem to assume that using a discounted premium subsidy method
would be the appropriate method. Compare William R. Horbatt & Alan Grossman, Division of Retiree
Health Benefits on Divorce: The New Equitable Distribution Frontier, 28 Fam. L.Q. 327, 331–32 (1994)
(arguing in favor of including health insurance benefits in marital property); with Jerry Reiss & Michael
R. Walsh, Post-Retirement Medical Benefits: A Not-So-Certain Property Right, 15 J. Amer. Acad.
Matrimonial Lawyers 375, 386–87 (1998) (arguing against including health insurance benefits in marital
property).
6
We have not found a decision from a court that uses this method, and at least one court appears to have
disapproved of it. See, e.g., Hansen, 119 P.3d at 1016.

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 If a party met this burden, then a trial court could deviate from an equal division to
achieve a just and proper distribution. For instance, Charles has repeatedly argued that his health
insurance benefits are illiquid and subject to risk. Although these factors cannot shield his health
insurance benefits from their proper categorization as an asset, they may be sufficient grounds
for the trial court to adjust the distribution of the marital property between the parties.

Conclusion

We therefore reverse the trial court‟s division of property and remand for further
proceedings on the valuation of Charles‟s benefits and reconsideration of the division of assets.

Sullivan, Boehm, and Rucker, JJ., concur.

Dickson, J. dissents with separate opinion.

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Dickson, Justice, dissenting.

I dissent, believing that the Court‟s opinion expands the division of marital property
contrary to statute, intrudes upon the legislature‟s public policy prerogatives, and significantly
and harmfully disrupts Indiana marriage dissolution law and practice.

Today‟s revision of the present understanding of divisible property to now include vested
future entitlements to health insurance benefits is predicated upon Indiana Code § 31-9-2-98(b),
which designates the property subject to division in a marriage dissolution as follows:

(b) “Property” . . . means all the assets of either party or both parties, including:
(1) a present right to withdraw pension or retirement benefits;
(2) the right to receive pension or retirement benefits that are not forfeited upon
termination of employment or that are vested (as defined in Section 411 of the
Internal Revenue Code) but that are payable after the dissolution of marriage;
and
(3) the right to receive disposable retired or retainer pay (as defined in 10 U.S.C.
1408(a)) acquired during the marriage that is or may be payable after the
dissolution of marriage.

Id. (emphasis added). As to the entitlement to receive future retirement health insurance
benefits, which falls within only subsection (b)(2) above, the legislature has designated the
vested rights defined in Section 411 of the Internal Revenue Code.

Section 411, however, includes an important express limitation. It states that “normal
retirement benefit[s]” are to be “determined without regard to – (A) medical benefits, and (B)
disability benefits not in excess of the qualified disability benefit.” 26 U.S.C. § 411(a)(9). By
specifically referencing Section 411, the legislature has thus indicated its intent to exclude
medical benefits from marital property subject to division.

Today‟s decision, in my view, represents a substantial departure not only from legislative
direction and intent but also from the common practice and understanding relating to the division
of vested future interests in dissolution cases. One extremely troubling application of today‟s

1
ruling is its impact in dissolution cases involving Hoosiers with retirement medical benefits from
their United States military service. Active duty military members receive exceptional benefits
for their years of service upon retirement. One of those benefits includes lifetime health
7
insurance care through the TriCare system. The military member‟s benefit can vest at the age of
thirty-eight and continue for the rest of the retiree‟s life. This benefit extends to the military
retiree‟s dependants, which includes the spouse of the retiree.8 In the event of a marriage
dissolution, however, the non-military spouse will almost always lose this benefit. 9 Under
today‟s holding, the military retiree‟s health benefits would be considered divisible marital
property and often warrant a sizeable valuation because of the potentially lengthy time the
military retiree would be eligible for the lifetime benefit. The resulting inclusion of its present
value as marital property would likely preclude a divorcing military retiree from retaining any
other marital property and require post-dissolution periodic property settlement payments to the
non-military former spouse. I seriously doubt that our legislature intended such potentially
catastrophic results.

Today‟s holding also introduces other substantial challenges to the valuation and
equitable distribution of marital property as parties and courts attempt to apply this new standard
to the wide variety of non-pension, assured future benefit packages that are becoming more
commonplace with many employers. For example, Hewlett-Packard (HP) provides discounts to
its retirees, allowing them to purchase HP products ranging from laptops to printer ink cartridges
at a reduced price.10 The airline industry is known for its retirement benefits that can include

7
TriCare, http://tricare.mil/mybenefit/home/overview/Eligibility? (last visited Sept. 15, 2010).
8
Id.
9
TriCare, http://tricare.mil/mybenefit/home/overview/Eligibility/Loss? (last visited Sept. 15, 2010). The
former spouse may retain this benefit as long as: (a) he or she does not remarry, (b) he or she was married
to the same military retiree for at least twenty years, (c) the military retiree has at least twenty years of
creditable service towards determining retirement pay, and (d) the marriage and creditable service
substantially overlap. Id.
10
HP Retirees: Employee Purchase Program, http://www.hp.com/retiree/epp.html (last visited Sept. 15,
2010).

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free flights for its employees and retirees, giving them the value of flying to any destination
worldwide that is serviced by the airline. Some automobile manufacturers also have a benefit
package for their employees and retirees. General Motors (GM) and Ford Motor Company both
provide their employees discounts on periodic vehicle purchases.11 Furthermore, many
companies, such as Verizon have teamed up with other companies to offer non-monetary
benefits to their retirees.12 Some of these benefits include discounts at Barnes & Noble, Dell
Computers, 1-800-Flowers, National Car Rental, and Sears Commercial.13 All of these benefits
have potential but speculative value to the beneficiary and provide no direct monetary
compensation to the designated beneficiary. Assigning a present value to such vested benefits
will be a formidable if not impossible task.

Believing that today‟s decision is contrary to statute, intrudes upon legislative policy-
making, and harmfully disrupts existing dissolution property division law, I dissent.

11
See GM Family First, https://www.gmfamilyfirst.com/ip-gmemployee/; Ford Motor Company, http://w
ww.ford.com/about-ford/careers/careers-benefits (last visited Sept. 15, 2010).
12
See Verizon, http://www22.verizon.com/content/retiree/your+discounts/other+discounts/other+discount
s.htm (last visited Sept. 15, 2010).
13
Id.

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